System and method for increasing capacity in an insurance system

ABSTRACT

The invention relates, in various aspects to systems, methods, and computer readable media suited for implementing a commonly administered, quota share-based multi-insurer primary insurance system.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.13/022,252, filed Feb. 7, 2011, now U.S. Pat. No. 8,135,600, entitledSystem and Method for Increasing Capacity in an Insurance System, whichis a continuation of U.S. patent application Ser. No. 12/059,169, filedMar. 31, 2008, now U.S. Pat. No. 7,885,835, entitled System and Methodfor Increasing Capacity in an Insurance System, the entireties of whichare incorporated herein by reference.

BACKGROUND OF THE INVENTION

Quota sharing refers to an insurance arrangement in which multipleinsurers share the revenue and liabilities associated with insurancepolicies. The portion or percentage of revenues and liabilities assumedby in insurer is referred herein to as a “quota share”. Quota sharinghas been used in reinsurance to reduce the risk portfolios of policiespose to individual primary insurers. For example, a reinsurer, in returnfor half the premiums received for a portfolio of policies, may agree toreimburse the primary insurer for half the costs arising from claimsrelated to any of the policies in the portfolio.

In other situations, reinsurers have broken down portfolios of policiesinto segments and have agreed to different quota shares for differentsegments of the portfolios. In both of these cases, however, the primaryinsurer is fully liable to the insured for all claims. As far as thecustomer is concerned, there is only a single insurer.

In other instances, two primary insurers have entered into relationshipsin which they agree to take on fixed quota shares for an entire book ofbusiness. Such relationships lack the flexibility of varying the numberof insurers participating in a given policy or the ability to assignquota shares to each policy based on characteristics of the particularpolicies, insurers, or customers.

One challenge facing certain members of the insurance industry is ashortage of capacity. In order to take on new business, insurers need tomaintain sufficient capital to handle potential losses. Lack of capacityleads to inefficiencies in the industry due to duplicativeadministration costs arising from customers seeking multiple tiers ofinsurance to fulfill their insurance needs.

Other insurers may have extra capacity with which they want to diversifytheir exposure without becoming subject matter experts in a particularindustry. In addition, other capital holders outside of the insuranceindustry could contribute their capital to the insurance industry, butlack the expertise, systems, and/or desire to administer insurancepolicies.

Thus, a need exists in the art for systems and methods that would allowinsurers to increase their capacity while keeping administration costslow and retaining flexibility in the liabilities they undertake.

SUMMARY OF THE INVENTION

A system providing common administration of quota shared primaryinsurance policies addresses this need. More particularly, by havingmultiple primary insurers issue single insurance policies, with eachinsurer assuming either, several, but not joint liability, or joint, butnot several, liability, for claims related to such policies, additionalcapital can be leveraged without incurring commensurate increases inoverhead. In addition, participants in such a system can avoid exposingthemselves to risks they deem undesirable by having the system assignquota shares among participating insurers on a policy-by-policy basis.In this fashion, participants can limit or entirely avoid participatingin policies that fail to fit within their desired risk profiles.

In addition, as each insurer is severally, but not jointly, liable forlosses, participating insurers can settle claims collectively, orindividually. For example, if one participating insurer believes a claimshould be challenged while another believes challenging a claim wouldnot be cost-efficient, each can take the action they deem appropriatewithout implicating the liabilities of the other.

The invention relates, in various aspects to systems, methods, andcomputer readable media suited for implementing a commonly administered,quota share-based multi-insurer primary insurance system. According toone aspect, the invention relates to a data processing system thatincludes a memory and a processor in communication with the processor.

The memory stores quota shares for at least two insurers in associationwith respective ones of a plurality of insurance policies. In oneembodiment, the memory stores, for each of the plurality of insurancepolicies, at least three policy numbers. One of the policy numbersrefers to the insurance policy as a whole, and the remaining policynumbers refer to respective assigned shares of the insurance policyamong at the least two insurers.

The processor is configured to determine quota shares to assign each ofthe respective insurance policies on a policy-by-policy basis. In oneembodiment, the processor is configured to determine the quota shares toassign to each of the respective insurance policies. For each of theinsurance polices, the processor determines the quota shares based atleast in part on characteristics of the individual insurance policies.For example, the quota share determination for a given policy may bebased on the type of coverage included in the policy, liability limitsincluded in policy, premiums associated with the policy, and whether thepolicy is a new policy or a renewal policy. The determination, invarious implementations, may also be based on characteristics of theentities seeking insurance and/or on characteristics of the insurers.Illustrative insurer characteristics that may be taken into accountinclude, without limitation, insurer underwriting guidelines, insurancecapacity, and appetite. Illustrative entity characteristics include,without limitation, the business of the entity, the claims history ofthe entity, the location of the entity, and any known entity-specificrisks. The determination could also be based on a length of time of arelationship among at least two of the insurers. In an alternativeembodiment, the system includes a user interface for accepting manualentry of quota shares. As a result of this policy-by-policy quota shareassignment, particular insurers may be assigned different quota sharesfor different policies.

The processor also allocates portions of claim liabilities or premiumrevenues associated with each of the policies among the at least twoinsurers according to the stored quota shares associated with thepolicy. Based on the allocation, the processor outputs a fund transferamount. The processor may also output insurance quotes and cause aprinting device to print an insurance policy and other insurancedocuments, which indicate the assigned quota shares.

In embodiments in which the processor is configured to allocate portionsof received premiums among multiple insurers, the fund transfer amountis a portion of the premium received in relation to a policy that is tobe transferred to one of the insurers based on the quota shareassociated with that insurer for that policy. In some implementations,the premiums received in relation to a given policy may be allocatedamong two, three, or more insurers. The processor may further beconfigured to initiate a deposit into an account associated with atleast one of the insurers based on the fund transfer amount.

In embodiments in which the processor is configured to allocate portionsof the liability among at least two insurers, the funds transfer amountis a portion of a claim liability allocated to at least one of the atleast two insurers based on the quota share associated with the at leastone insurer and the policy. In one embodiment, the processor isconfigured to generate a report for at least one of the insurersincluding a total of claim liabilities allocated to the insurer. Inanother embodiment, the processor is configured to initiate a paymentfrom an account associated with one of the at least two insurers to aclaimant based on the fund transfer amount.

According to another aspect, the invention relates to a computerreadable medium that stores computer executable instructions. Uponexecution on a processor, the computer executable instructions cause theprocessor to carry out a method of administering a plurality ofinsurance policies. The method includes determining quota shares toassign each of the plurality of insurance policies for at least twoparticipating insurers. For each of the insurance polices, the quotashares are determined based at least in part on characteristics of therespective insurance policies. The determined quota shares are thenstored in a memory. The method further includes allocating portions of aclaim liability or a received premium associated with at least one ofthe insurance policies among the at least two insurers according to thestored quota shares associated with the at least one insurance policy.In addition the computer executable instructions cause the processor tooutput a fund transfer amount based on the allocation.

According to another aspect, the invention relates to a method ofadministering a plurality of insurance policies. The method includesdetermining quota shares to assign each of the plurality of insurancepolicies for at least two participating insurers. For each of theinsurance polices, the quota shares are determined based at least inpart on characteristics of the respective insurance policies. Thedetermined quota shares are then stored in a memory. The method furtherincludes allocating portions of a claim liability or a received premiumassociated with at least one of the insurance policies among the atleast two insurers according to the stored quota shares associated withthe at least one insurance policy. The method then includes outputting afund transfer amount based on the allocation.

BRIEF DESCRIPTION OF THE DRAWINGS

The invention may be better understood from the following illustrativedescription with reference to the following drawings.

FIG. 1A is a block diagram of a system for insuring customers, accordingto a illustrative embodiment of the invention.

FIG. 1B is a block diagram of a second system for insuring customers,according to a illustrative embodiment of the invention.

FIG. 2 is a block diagram of an insurance administration system,according to a illustrative embodiment of the invention.

FIG. 3 is a flow chart of a method of binding an insurance policy,according to a illustrative embodiment of the invention.

FIG. 4 is a flow chart of a method of underwriting an insurance policyaccording to a illustrative embodiment of the invention.

FIG. 5 is a flow chart of a method of claim administration, according toa illustrative embodiment of the invention.

FIG. 6 is a block diagram of a computing architecture suitable forimplementation of the insurance administration system of FIG. 2,according to a illustrative embodiment of the invention.

DESCRIPTION OF CERTAIN ILLUSTRATIVE EMBODIMENTS

To provide an overall understanding of the invention, certainillustrative embodiments will now be described, including systems andmethods for implementing a commonly administered, quota share-basedmulti-insurer primary insurance program. However, it will be understoodby one of ordinary skill in the art that the methods and systemsdescribed herein may be adapted and modified as is appropriate for theapplication being addressed and that the systems and methods describedherein may be employed in other suitable applications, and that suchother additions and modifications will not depart from the scope hereof.

FIG. 1A is a block diagram of a system 100 for insuring customers,according to a illustrative embodiment of the invention. The systemincludes an insurance administration system 102, multiple insurers 104,an underwriter 106, a claims manager 108, an insurance agent 110, and aninsurance broker 112. The insurance administration system 102 serves asan independent service provider to the insurance providers 104 inadministering insurance policies for which at least two of the insurers104 share received premiums and primary responsibility for claims. Thefunctionality of the insurance administration system 102 is describedfurther in relation to FIGS. 2 and 4-6.

The insurance administration system 100 utilizes an underwriter 106 forunderwriting new and renewal policies and a claims manager 108 forevaluating and managing claims related to administered policies. Theunderwriter 106 and claims manager 108, in one embodiment, are notaffiliated with any of the insurers 104. In other embodiments, theunderwriter 106 and claims manager 108 are affiliated with one of theinsurers 104. In still other embodiments, the insurance administrationsystem includes multiple underwriters 106 and/or claims managers 108. Inthese embodiments, one or more of the underwriters 106 and/or claimsmanagers 108 are affiliated with one or more of insurers 104. Stillother underwriters 106 and claims managers 108 may be fully independent.

The insurance agent 110 and insurance broker 112 may also be affiliatedwith one or more of the insurers 104, or they may be independent. Theinsurance agent 110 and broker 112 provide business opportunities toinsurance administration system 102. The insurance administration system102 can then offer a quote for insurance coverage to be shared by one ormore combinations of at least two of the insurers 104. The insurers 104grant the insurance administration system 102 the authority to bind themto policies offered through the insurance administration system 102 solong as the insurance administration system 102 applies underwritingguidelines approved by the respective insurers 104. As a result, if acustomer accepts a quote presented by the insurance administrationsystem 102, the insurance administration system 102 can bind the policyfor the insurers 104 to issue.

The insurers 104, underwriter 106, claims manager 108, agent 110, andbroker 112 may communicate with the insurance administration system 102via network connections, for example, over the Internet or other publicor private wide or local area network.

FIG. 1B is a block diagram of a second system 150 for insuringcustomers, according to an illustrative embodiment of the invention. Incontrast to the system 100, in the second system 150, an insuranceadministration system 152 is directly operated by one of the insurers104, referred to herein as the administering insurer 153. Thus, theinsurance administration system 152 primarily utilizes an underwriter154, a claims manager 156, agents 158, and/or brokers 160 directlyaffiliated with the administering insurer 153. In certain circumstances,for example, if the claims manager 156 obtains an evaluation of theclaim that indicates it represents a liability that is greater than athreshold set by one of the non-administering insurers 104, that insurer104 may utilize an independent claims evaluator or its own claimsmanager 162 to obtain another evaluation of the claim. Similarly, inunderwriting, if the evaluation of a proposed policy by the underwriter154 affiliated with the administering insurer 153 meets criteria set byone of the non-administering insurers 104, that insurer 104 may have itsown underwriter 164 conduct an independent evaluation of the proposedpolicy. It should be noted that the non-administering insurers need nothave their own underwriters or 164 or claims manager 162. For example inFIG. 1B, insurer 3 does not have its own underwriter or claims manager,and relies fully on the underwriter 154 and claims manager 156 of theadministering insurer 153. Generally, however, the operation of theinsurance administration system 152 is substantially the same as theoperation of the insurance administration system 102 of FIG. 1A.

FIG. 2 is a block diagram of an insurance administration system 200,such as the insurance administration systems 102 and 152 of FIGS. 1A and1B, according to an illustrative embodiment of the invention. Theinsurance administration system 200 includes an administrationapplication 204, an insurer database 205, and a customer database 206.Together, these components operate to provide common administration ofinsurance policies for which multiple insurers 104 share premium-derivedrevenue and either, severally, but not jointly share, or jointly, butnot severally, share, in the liability associated with claims arising inrelation to such policies.

The administration application 204 is preferably a software applicationcoded in C, C++, JAVA, or other programming language known in the art.In one embodiment, the administration application includes a Quote/Bindmodule 208, an underwriting module 210, a payment module 212, a claimsprocessing module 214, a reporting module 216, and a user interfacemodule 218.

The quote/bind module 208 of the administration application 204 isresponsible for determining which, if any, of the insurers will sharethe revenue and liabilities associated with an insurance policy. For asmaller policy, the policy may be issued by only a single insurer.Insurers that share in the revenue and liability associated with aparticular insurance policy are referred to herein as “participatinginsurers.” The quote/bind module 208 also determines how the revenuesand liabilities will be shared, as well as the total premium to becollected in relation to the policy. Finally, quote/bind module 208outputs a quote to an agent, broker, employee, or customer including thedetermined information as an offer for insurance. Upon acceptance of thequote, the quote/bind module 208 binds a policy reflecting thearrangement set forth in the quote.

FIG. 3 depicts a method of binding an insurance policy 300, as may beimplemented by the quote/bind module 208 of FIG. 2. The method 300begins with the quote/bind module obtaining data related to a policy tobe quoted (step 302). The policy data may be data related to a newlyrequested policy, a request for a policy adjustment, or a request torenew an expiring policy. The policy data includes data about thecustomer, the requested coverages, and associated limits. If the policyis an existing policy with existing quote sharing relationship in placeamong multiple insurers 104, the policy data also includes the existingquota shares associated with the policy. The quote/bind module 208obtains the policy data directly from the customer, from an agent orbroker or from the customer database 206.

The quote bind module 208 then underwrites the proposed policy (step304) by invoking the underwriting module 210. The underwriting module210 evaluates the proposed policy in light of predetermined underwritingguidelines. In general, the underwriting module 210 outputs a ratingassociated with policy and/or an associated premium. Additional detailsregarding the underwriting process are described further below inrelation to FIG. 4.

Assuming that the policy meets the minimum standards for at least oneparticipating insurer, the quote/bind module 208 determines quota shares(step 306) to apply to the proposed policy. In addition, if, as in someembodiments, the underwriting module 208 outputs a rating, but not apremium, the quote/bind module 208 prices the policy at this stage, too.The quote/bind module 208 may determine the quota shares based onseveral factors including, in some embodiments, the underwritingresults. The following are illustrative examples of how variousimplementations of the quote/bind module 208 determine the quota shares.

Example 1 Relationship Length Quota Share Assignment

In a first illustrative implementation, the quote/binding module 208determines the quota shares based on the amount of time one of theinsurers has been insuring the customer in the proposed policy. Thisimplementation is particularly suitable for use in administrationapplications 204 operating on insurance administration systems such asinsurance administration system 152 of FIG. 1B. In such systems, as theunderwriting is carried out by an underwriter associated with theadministering insurer 153, the initial risk associated with a policy maybe allocated entirely, or mostly, to the administering insurer 153. Forexample, in the case of a proposed new policy, the quote/binding module208 assigns 100% of the revenue and risk associated with the new policyto the administering insurer 153. Alternatively, for a new policy, thequote/bind module may assign quota shares of about 75% to about 95% tothe administering insurer 153, and the remaining 5%-25% may be splitamong one or more non-administering insurers 104. Then, each year, asthe policy is renewed, the quote/bind module 208, can re-distribute thequota shares among the insurers sharing the revenue and risk.

Example 2 Relative Capacity Quota Share Assignment

In a second illustrative implementation, the quote/binding module 208determines the quota sharings based on the relative capacities of theparticipating insurers to take on new risk. Based on, e.g., the size,capitalization, and other obligations of an insurer, each insurer may bewilling to write varying levels of new business. Consider, for example,insurer A has $25M in capacity to write, and insurer B has $75M incapacity. In this scenario, the quote/binding module 208 would assignquota shares of 25% and 75% to Companies A and B, respectively. Capacitydata for each insurer is stored in the insurer database 205.

Example 3 Variable Capacity Limit Quota Share Assignment

In a third illustrative implementation similar to the second, insurersmaintain capacity limits for certain risk levels. For example, aninsurer may maintain a lower capacity for writing higher risk policiesthan lower risk policies. In such instances, quota share assignments aretied to the output of the underwriting module 210. Alternatively,insurers may set capacity limits based on specific risks. For example,an insurer may set a limit on the coverage it will write for customerslocated in a particular geographical area, e.g., a specific flood zone,such that a single incident is unlikely to result in overly burdensomelosses for that insurer. Similarly, insurers may set capacity levelsbased on customer business activity. For example, an insurer may set atotal liability capacity for insuring chemical companies or constructioncompanies. Based on these distinct capacity limits, the quote/bindmodule 208 assigns quota share levels among insurers based on theirrelative capacities to insure the particular risk. If doing so wouldexceed the capacity of any of the participating insurers, that insurer'sparticipation would be capped at its capacity threshold. Capacity datafor each insurer is stored in the insurer database 205.

Example 4 Absolute Liability Limit Quota Share Assignment

In a third illustrative implementation, the quote binding module 208assigns quota shares according to absolute liability limits set by oneor more the participating insurers. Consider the following: Insurer Aagrees to share equally in liability for any given policy up to a totalof $1M. Insurer B agrees to take on any necessary share such thattogether insurers A and B can fully insure a customer. If a customerrequests $2M in coverage, quote/binding module 208 assigns a quota shareof 50% to insurers A and B. If a customer requests $3M in coverage,quote binding module 208 assigns quota shares of about 33% and 67% toinsurers A and B, respectively. Liability limit data for each insurer isstored in the insurer database 205.

Example 5 Variable Liability Limit Quota Share Assignment

This implementation is similar to that of the implementation describedin example 3, except that the liability limits for a particular insurervary based on characteristics of the customer or proposed policy. Forexample, an insurer may set different liability limits for differentrating categories. Thus, the quote/binding module 208 assigns the quotashares at least in part on the output of the underwriting module 210.Liability limits may also be set based on any of the other criteriamentioned in relation to the setting of total capacity limits, describedwith respect to Example 2. Liability limit data for each insurer isstored in the insurer database 205.

Example 6 Manual Input Quota Share Assignment

In an additional implementation, the quota share assignments are mademanually by a system user. The system user may set the quota sharesusing any of the methodologies described above, or based on otherfactors including individually negotiated quota sharing arrangements.

The above-described quota share assignment processes may also becombined in a variety of ways without departing from the scope of theinvention.

After quota the shares are assigned by the quote/bind module 208, thequote/bind module stores the assigneds in the customer database (step308). Optionally, the quote/bind module 208, the underwriting module210, or a separate reinsurance module are employed to obtain reinsurancefor one or more of the insurers' quota shares (step 309). Suchreinsurance may be obtained for one insurer's quota share independent ofany other insurer's quota share. Reinsurance information is stored inthe insurer or customer database 205 or 206.

Based on the underwriting and the quota share determinations, the quotebind module 208 issues a quote (step 310) for the proposed policy. Thequote includes an identification of the participating insurers and theirrespective quota shares. In one implementation, the quote is outputelectronically, for example, via electronic mail or web-basedcommunication, over a network link to a user 222 of the administrationapplication 204. The user 222 may be an insurance agent 110 or 158, aninsurance broker 112 or 160, or an insurer employee. Alternatively, theuser 222 may be a customer.

If the quote is accepted (at decision block 312), the quote/bind module208 binds policy (step 314), initiating a policy issuance process thatincludes printing and forwarding a copy of a policy to the customer. Thepolicy may be printed by a printing device coupled to the insuranceadministration system 200. The policy includes an indication of theparticipating insurers and their respective quota shares. Upon binding apolicy, the quote/binding module 208 opens multiple account records forthe bound policy, each with its own policy number. The first record isan administrative record and relates to the policy as a whole. Eachadditional record relates to a particular participating insurer's shareof the policy. As a result, if a participating insurer wishes to managea claim for a particular policy independently from other participatinginsurers, information related to such management can be stored in thatin relation to the record corresponding to that insurer's share of thepolicy. If the quote is rejected (at decision block 312) the method 300ends, until a revised request for insurance is received.

After a policy is bound (at step 314), the customer is billed for theinsurance (step 316). The bill may be issued through an agent 110 or 158or broker 112 or 160. In one implementation, on a regular basis, agents110 or 158, or broker 112 or 160, forward a single payment including thesum of premiums collected for multiple policies administered by theinsurance administration system 200. This single payment is accompaniedby information indicating which policies the collected premiums arerelated to. In other implementations, the insurance administrationsystem 200 directly bills (step 316) customers for their respectivepolicies.

Upon the insurance administration system 200 receiving premiums (step318) associated with one or more policies, the administrationapplication 204 allocates the received premiums among the insurersparticipating in those policies (step 320) via the payment module 212 ona policy-by-policy basis. Premiums are allocated (step 320) based on thequota shares associated with the participating insurers. For example,for an insurer which is assigned a 30% quota share for a particularpolicy, the payment module 212 allocates to that insurer 30% of premiumsreceived in relation to that policy. The funds may be deposited in abank account associated with the insurance administration system 200prior to allocation among participating insurers. The payment module 212then transfers funds from the system account to bank accounts maintainedfor the respective participating insurers (step 322). This fund transferprocess, in one implementation, includes electronically outputting afund transfer amount to a bank along with source account and destinationaccount information.

FIG. 4 is flow chart of a method of underwriting 400 a proposedinsurance policy, as may be carried out by the underwriting module 210of the administration application 204 of FIG. 2 at step 304 of themethod of FIG. 3. While the method 400 is described below in relation tounderwriting module 210, the method may also be independentlyimplemented (i.e., outside of the context of an administrationapplication 204) by underwriters engaged to underwrite policies handledby insurance administration systems 102 and 152 of FIGS. 1A and 1B.

Referring to FIGS. 2 and 4, the underwriting method 400 begins with theunderwriting module 210 conducting an initial underwriting of a proposedpolicy (step 402). The underwriting module 210 retrieves informationneeded to carry out the initial underwriting from the customer database206. The underwriting module 210 then processes the retrieved datausing, for example, a rating engine. The rating engine includes a set ofunderwriting criteria and guidelines to apply to the customer data inlight of the requested policy.

Based on the retrieved information and the initial underwriting, theunderwriting module determines whether any additional underwriting maybe required by specific insurers that may desire to participate in thepolicy (decision block 404). To aid in this determination, insurersparticipating in the insurance administration system 200 may storeinsurer specific criteria in the insurer database 205 related to theirunderwriting preferences. For example, an insurer may set one or“additional underwriting triggers.” If the underwriting module 210determines one or more additional underwriting triggers have been met(at decision block 404), the underwriting module forwards the proposedpolicy data to an underwriter affiliated with the corresponding insurerto provide further evaluation (step 406). The following are examples ofadditional underwriting triggers suitable for use by participatinginsurers.

Example 1 Rating Based Triggers

In this example, an insurer sets a rating threshold. If the underwritingmodule 210 determines that a policy exceeds the rating threshold, theunderwriting module 210 forwards the proposed policy data to anunderwriter selected by the insurer for further review. Based on thisfurther underwriting, the insurer may decline to participate in thepolicy, require a different rating to participate, or require differentpolicy parameters (e.g., limits or exclusions) to participate.

Example 2 Quota Share Based Triggers

In this example, an insurer sets a quota share threshold. If theunderwriting module 210 determines that a policy exceeds the quota sharethreshold, the underwriting module 210 forwards the proposed policy datato an underwriter selected by the insurer for further review. Based onthis further underwriting, the insurer may decline to participate in thepolicy, require a different quota share to participate, or requiredifferent policy parameters (e.g., limits or exclusions) to participate.

Example 3 Customer Characteristic Based Triggers

In this example, an insurer identifies specific characteristics, whichif a particular customer has one or more of such characteristics, theinsurer requires further underwriting to participate. Suchcharacteristics may include geographic location, industryclassification, specific loss history characteristics, etc. If theunderwriting module 210 determines that customer requesting a proposedpolicy possesses any of these characteristics, the underwriting module210 forwards the proposed policy data to an underwriter selected by theinsurer for further review. Based on this further underwriting, theinsurer may decline to participate in the policy, require a differentrating to participate, or require different policy parameters (e.g.,limits or exclusions) to participate.

Example 4 Policy Characteristic Based Triggers

In this example, an insurer identifies specific policy characteristicsto trigger further underwriting. Such characteristics may includeliability limit thresholds, deductible thresholds, inclusion of specificcoverages, etc. If the underwriting module 210 determines that arequested policy has any of these characteristics, the underwritingmodule 210 forwards the proposed policy data to an underwriter selectedby the insurer for further review. Based on this further underwriting,the insurer may decline to participate in the policy, require adifferent rating to participate, or require different policy parameters(e.g., limits or exclusions) to participate.

Certain insurers may utilize combinations of the above triggers withoutdeparting from the scope of the invention.

Based on the initial underwritings results, and, if needed, anysupplemental underwriting required by specific insurers, theunderwriting module determines a premium price (step 408) for theproposed policy according to any premium determination process known inthe art.

Referring back to FIG. 2, the administration application 204 alsoincludes a claims processing module 214. The claims processing module214 is responsible for administering claims filed in relation toinsurance policies managed by the insurance administration system 200.The functionality of the claims processing module is best understood inrelation the method of claim administering 500 depicted in FIG. 5.

More particularly, FIG. 5 is a flow chart of a claim administrationmethod 500 suitable for implementation by the claims processing module214, according to an illustrative embodiment of the invention. Referringto FIGS. 2 and 5, the method 500 begins with the insuranceadministration system 200 receiving a notice of loss associated with apolicy administered by the system 200 (step 502). The notice of losspreferably includes preliminary details about the loss and thecircumstances surrounding the loss. The claims processing module 214then forwards the loss information to a claims manager to evaluate theclaim (step 504). The claims manager preferably returns a loss magnitudevalue as well as data that can be used to verify the veracity of theclaim and to determine whether the loss is covered by the policy inquestion.

Assuming the loss is in fact covered by the policy and there the managerfails to find significant indicia of fraud, the claims processing modulecompares the magnitude of the loss to thresholds set by insurersparticipating in the policy at decision block 506. Such thresholds maybe stored in the insurer database 205. Insurers may store singlethresholds, or thresholds that vary based on various parameters,including, for example, the coverage implicated, the type of lossgenerally (e.g., property versus liability versus bodily injury), orspecific type of loss (e.g., soft-tissue injury versus broken bone,etc.) If the magnitude falls below all participating insurer'sapplicable thresholds, the claims processing module 214 proceeds toallocate the determined liability among the participating insurers basedon their respective quota shares (step 508). For example, if threeinsurers are participating in a policy with equal quota shares, and aclaims manager values a claim at $300,000, each insurer is allocated$100,000 of the liability. The insurers are severally, but not jointly,liable for the claim according to their quota shares. That is, noparticipating insurer is responsible for more than its quota share ofthe liability. This allows each insurer to settle its portionindependently of the remaining participating insurers.

If the claims manager's evaluation of the claim exceeds a participatinginsurer's threshold, the claims processing module 214 forwards theinformation obtained about the claim to a claims manager identified bythe insurer for an independent evaluation of the claim (step 510). Basedon the initial evaluation and the subsequent insurer specific claimevaluation, the claims processing module 214 allocates the claimliability among the participating insurers (step 512). The allocation toeach insurer is based on either the initial evaluation, if the resultsdid not exceed the threshold of that particular insurer, or theinsurer's independent claim evaluation and each insurer's respectivequota share if the initial evaluation surpassed their threshold(s).Consider the following example:

Example Claim Allocation:

Insurers A, B, and C issue a several, but not joint, quota shared policyto Customer 1, with quota shares 25%, 25%, and 50%, respectively.Customer 1 then notifies the insurance administration system of a loss.The claims manager affiliated with the insurance administration systemobtains an evaluation of the claim, indicating the liability to be atotal of $10M, 50% of which exceeds the $3M claim liability threshold ofInsurer C. Thus, Insurer C conducts its own claim evaluation. The claimsmanager for Insurer C evaluates the total claim as a $9.5M claim ofwhich $4.75M is Insurer C's 50% portion of liability.

The claims processing module 214 then allocates liability to Insurers A,B, and C. As Insurers A and B did not conduct an independent claimsevaluation, the claims processing module 214 applies the initial $10Mevaluation in allocating liability, resulting in allocations of $2.5M(25% of $10M) to both Insurer A and Insurer B. Claims processing module214 then applies Insurer C's independent claim evaluation in allocatingliability to Insurer C. Thus, the claims processing module allocates$4.75.M (50% of $9.5M) to Insurer C.

The allocation of liability by the claims processing module 214 is thenreported (step 514) to the respective insurers. Allocated liability canbe reported immediately upon allocation, from time to time, or accordingto a regular schedule, e.g., monthly. Such allocations can then be usedby the insurers to set their reserves and to include in any requisiteregulatory filings. Reports are generated and output by the reportingmodule 216.

If reinsurance was purchased for any of the participating quota shares(e.g., at step 309), the claims processing module 214 can may alsotransmit a report and/or bill to the appropriate reinsurer (step 515).

In addition, the claims processing module 214, in conjunction with thepayment module 212, can issue payments related to claims (step 516). Forexample, after allocation of liability, the payment module 214 canoutput fund transfer amounts associated with each insurer to initiatethe printing and sending of checks from accounts associated with theparticipating insurers to claimants based on their allocated liability.Claimants may include the insured, an injured party, or any other partyentitled to a payment under the policy, including, without limitation,medical providers, attorneys, or other service providers addressing theloss. Thus, if no liability thresholds are exceeded requiring insurerspecific claims evaluation, the insurance administration system 200 canhandle a claim from receipt of a notice of loss through claim settlementwithout the participating insurer needing to intervene at all.

The reporting module 216 generates a variety of reports forparticipating insurers in addition to the liability reports describedabove. Example reports include total exposure reports, exposure reportsby policy category, and accounting reports. Such reports may begenerated automatically according to a schedule or, alternatively, uponrequest by a user via the user interface 218. Such reports may be outputelectronically, e.g., to a display or as an electronic communication, orin paper format via a printing device coupled to the system 200.

FIG. 6 is a block diagram of a computing architecture suitable forimplementing a computing device on which the insurance administrationsystem 200 may be implemented. Computer 601 comprises at least onecentral processing unit (CPU) 602, at least one read-only memory (ROM)603, at least one communication port or hub 604, at least one randomaccess memory (RAM) 605, and one or more databases or data storagedevices 606. All of these later elements are in communication with theCPU 602 to facilitate the operation of the computer 601. The computer601 may be configured in many different ways. For example, computer 601may be a conventional standalone computer or alternatively, the functionof computer 601 may be distributed across multiple computing systems andarchitectures.

Computer 601 may be configured in a distributed architecture, whereindatabases and processors are housed in separate units or locations. Somesuch units perform primary processing functions and contain at aminimum, a general controller or a processor 602, a ROM 603, and a RAM605. In such an embodiment, each of these units is attached to acommunications hub or port 604 that serves as a primary communicationlink with other servers 607, client or user computers 608 and otherrelated devices 609. The communications hub or port 604 may have minimalprocessing capability itself, serving primarily as a communicationsrouter. A variety of communications protocols may be part of the system,including but not limited to: Ethernet, SAP, SAS™, ATP, BLUETOOTH™, GSMand TCP/IP.

The CPU 602 comprises a processor, such as one or more conventionalmicroprocessors and one or more supplementary co-processors such as mathco-processors. The CPU 602 is in communication with the communicationport 604 through which the CPU 602 communicates with other devices suchas other servers 607, user terminals 608, or devices 609. Thecommunication port 604 may include multiple communication channels forsimultaneous communication with, for example, other processors, serversor client terminals. Devices in communication with each other need notbe continually transmitting to each other. On the contrary, such devicesneed only transmit to each other as necessary, may actually refrain fromexchanging data most of the time, and may require several steps to beperformed to establish a communication link between the devices.

The CPU 602 is also in communication with the data storage device 606.The data storage device 606 may comprise an appropriate combination ofmagnetic, optical and/or semiconductor memory, and may include, forexample, RAM, ROM, flash drive, an optical disc such as a compact discand/or a hard disk or drive. The CPU 602 and the data storage device 606each may be, for example, located entirely within a single computer orother computing device; or connected to each other by a communicationmedium, such as a USB port, serial port cable, a coaxial cable, aEthernet type cable, a telephone line, a radio frequency transceiver orother similar wireless or wired medium or combination of the foregoing.For example, the CPU 602 may be connected to the data storage device 606via the communication port 604.

The data storage device 606 may store, for example, (i) a program (e.g.,computer program code and/or a computer program product) adapted todirect the CPU 602 in accordance with the present invention, andparticularly in accordance with the processes described in detail withregard to the CPU 602; (ii) databases adapted to store information thatmay be utilized to store information required by the program. Suitabledatabases include the insurer database 205 and customer data base 208 ofFIG. 2.

The program may be stored, for example, in a compressed, an uncompiledand/or an encrypted format, and may include computer program code. Theinstructions of the program may be read into a main memory of theprocessor from a computer-readable medium other than the data storagedevice 606, such as from a ROM 603 or from a RAM 605. While execution ofsequences of instructions in the program causes the processor 602 toperform the process steps described herein, hard-wired circuitry may beused in place of, or in combination with, software instructions forimplementation of the processes of the present invention. Thus,embodiments of the present invention are not limited to any specificcombination of hardware and software.

Suitable computer program code may be provided for performing numerousfunctions such as underwriting proposed insurance policies, assigningquota shares, and allocating claim liability among participatinginsurers. The program also may include program elements such as anoperating system, a database management system and “device drivers” thatallow the processor to interface with computer peripheral devices 609(e.g., a video display, a keyboard, a computer mouse, etc.).

The term “computer-readable medium” as used herein refers to any mediumthat provides or participates in providing instructions to the processorof the computing device (or any other processor of a device describedherein) for execution. Such a medium may take many forms, including butnot limited to, non-volatile media and volatile media. Non-volatilemedia include, for example, optical, magnetic, or opto-magnetic disks,such as memory. Volatile media include dynamic random access memory(DRAM), which typically constitutes the main memory. Common forms ofcomputer-readable media include, for example, a floppy disk, a flexibledisk, hard disk, magnetic tape, any other magnetic medium, a CD-ROM,DVD, any other optical medium, punch cards, paper tape, any otherphysical medium with patterns of holes, a RAM, a PROM, an EPROM orEEPROM (electronically erasable programmable read-only memory), aFLASH-EEPROM, any other memory chip or cartridge, or any other mediumfrom which a computer can read.

Various forms of computer readable media may be involved in carrying oneor more sequences of one or more instructions to the processor 602 (orany other processor of a device described herein) for execution. Forexample, the instructions may initially be borne on a magnetic disk of aremote computer 608. The remote computer 608 can load the instructionsinto its dynamic memory and send the instructions over an Ethernetconnection, cable line, or even telephone line using a modem. Acommunications device 604 local to a computing device (or, e.g., aserver) can receive the data on the respective communications line andplace the data on a system bus for the processor. The system bus carriesthe data to main memory, from which the processor retrieves and executesthe instructions. The instructions received by main memory mayoptionally be stored in memory either before or after execution by theprocessor. In addition, instructions may be received via a communicationport as electrical, electromagnetic or optical signals, which areexemplary forms of wireless communications or data streams that carryvarious types of information.

The invention may be embodied in other specific forms without departingfrom the spirit or essential characteristics thereof. The forgoingembodiments are therefore to be considered in all respects illustrative,rather than limiting of the invention.

What is claimed is:
 1. A data processing system comprising: a memory forstoring: quota shares for each of a plurality of primary insurancepolicies assigned to at least two primary insurers, wherein the quotashares are assigned at least in part based on a type of coverageincluded in the respective primary insurance policies; and claimliability data for at least one insurance claim related to at least oneof the primary insurance policies; and a processor configured to:allocate received premium payments associated with at least one of theprimary insurance policies among the at least two primary insurersaccording to the quota shares assigned to the at least one primaryinsurance policy; receive a first evaluation of a claim associated withat least one of the primary insurance policies; and allocate portions ofclaim liability among the at least two primary insurers based on quotashares assigned to the at least one primary insurance policy.
 2. Thedata processing system of claim 1, wherein the memory also stores atleast one claim liability loss threshold for each of the primaryinsurers, and the processor is further configured to: compare the firstevaluation of a first of the at least one insurance claim to the atleast one loss threshold for each of the primary insurers related to thefirst claim; forward information about the first claim to a primaryinsurer for an independent claim evaluation if the primary insurer has aloss threshold that is lower than a liability the primary insurer wouldbe allocated for the claim based on the first claim evaluation and thequota share assigned to the primary insurer for the insurance policyrelated to the first claim; and allocate portions of the claim liabilityfor the first claim among the at least two primary insurers based inpart on the independent claim evaluation.
 3. The data processing systemof claim 1, wherein the evaluation of the claim associated with at leastone of the primary insurance policies includes information related to atleast one of the magnitude of the claim and the veracity of the claim.4. The data processing system of claim 1, wherein the processor isfurther configured to output a fund transfer amount based on theallocation of the received premium payments.
 5. The data processingsystem of claim 4, wherein the fund transfer amount comprises at least aportion of the received premium allocated to one of the primaryinsurers.
 6. The data processing system of claim 4, wherein theprocessor is configured to initiate a deposit into an account associatedwith one of the at least two primary insurers based on the fund transferamount.
 7. The data processing system of claim 1, wherein the processoris further configured to output a fund transfer amount based on theallocation of the claim liability.
 8. The data processing system ofclaim 7, wherein the fund transfer amount comprises a portion of a claimliability allocated to at least one of the at least two primaryinsurers.
 9. The data processing system of claim 7, wherein theprocessor is configured to initiate a payment from an account associatedwith one of the at least two primary insurers to a claimant based on thefund transfer amount.
 10. The data processing system of claim 1, whereinthe quota shares stored in memory are assigned further based at least inpart on at least one of liability limits included in the respectiveprimary insurance policies, premiums associated with the respectiveprimary insurance policies, and whether the primary insurance policiesare new or renewal policies.
 11. The data processing system of claim 1,wherein the quota shares stored in memory are assigned further based atleast in part on characteristics of the at least two primary insurers.12. The data processing system of claim 1, wherein the quota sharesstored in memory are assigned further based at least in part oncharacteristics of the entities requesting the primary insurancepolicies.
 13. The data processing system of claim 1, wherein the memorystores, for at least one of primary insurance policies, at least threepolicy numbers, wherein one of the numbers refers to the primaryinsurance policy as a whole, and the remaining policy numbers refer tothe respective quota shares assigned to the primary insurance policy forthe at the least two primary insurers.
 14. A non-transitory computerreadable medium storing instructions, which when executed by aprocessor, cause the processor to carry out a method of administering aplurality of primary insurance policies, the method comprising: storingin a memory quota shares for each of a plurality of primary insurancepolicies assigned to at least two primary insurers, wherein the quotashares are assigned at least in part based on a type of coverageincluded in the respective primary insurance policies; storing in thememory claim liability data for at least one insurance claim related toat least one of the primary insurance policies; allocating receivedpremium payments associated with at least one of the primary insurancepolicies among the at least two primary insurers according to the quotashares assigned to the at least one primary insurance policy; receivinga first evaluation of a claim associated with at least one of theprimary insurance policies; and allocating portions of claim liabilityamong the at least two primary insurers based on quota shares assignedto the at least one primary insurance policy.
 15. The computer readablemedium of claim 14, wherein the computer readable instructions cause theprocessor to: compare the first evaluation of a first of the at leastone insurance claim to at least one loss threshold for each of theprimary insurers related to the first claim; forward information aboutthe first claim to a primary insurer for an independent claim evaluationif the primary insurer has a loss threshold that is lower than aliability the primary insurer would be allocated for the claim based onthe first claim evaluation and the quota share assigned to the primaryinsurer for the insurance policy related to the first claim; andallocate portions of the claim liability for the first claim among theat least two primary insurers based in part on the independent claimevaluation.
 16. The computer readable medium of claim 14, wherein thecomputer readable instructions cause the processor to base theevaluation of the claim associated with at least one of the primaryinsurance policies on information related to at least one of themagnitude of the claim and the veracity of the claim.
 17. The computerreadable medium of claim 14, wherein the computer readable instructionscause the processor to output a fund transfer amount based on theallocation of the received premium payments.
 18. The computer readablemedium of claim 17, wherein the computer readable instructions causesthe processor to initiate a deposit into an account associated with oneof the at least two primary insurers based on the fund transfer amount.19. The computer readable medium of claim 14, wherein the computerreadable instructions cause the processor to output a fund transferamount based on the allocation of the claim liability.
 20. The computerreadable medium of claim 19, wherein the computer readable instructionscauses the processor to initiate a payment from an account associatedwith one of the at least two primary insurers to a claimant based on thefund transfer amount.
 21. The computer readable medium of claim 14,wherein the computer readable instructions cause the processor togenerate a report to at least one of the primary insurers including atotal of claim liabilities allocated to the primary insurer according tothe stored quota shares.
 22. A computerized method of administering aplurality of primary insurance policies comprising: storing in a memoryof a computer system data indicative of quota shares for each of aplurality of primary insurance policies assigned to at least two primaryinsurers, wherein the quota shares are assigned at least in part basedon a type of coverage included in the respective primary insurancepolicies; storing in the memory claim liability data for at least oneinsurance claim related to at least one of the primary insurancepolicies; determining by a processor of the computer system allocationdata for allocating received premium payments associated with at leastone of the primary insurance policies among the at least two primaryinsurers according to the quota shares assigned to the at least oneprimary insurance policy; receiving by the processor data indicative ofa first evaluation of a claim associated with at least one of theprimary insurance policies; and determining by the processor dataindicative of allocations of portions of claim liability among the atleast two primary insurers based on data indicative of quota sharesassigned to the at least one primary insurance policy.
 23. Thecomputerized method of claim 22, further comprising: comparing by theprocessor the first evaluation of a first of the at least one claims toat least one loss threshold for each of the primary insurers related tothe first claim; forwarding via a communications port information aboutthe first claim to a primary insurer for an independent claim evaluationif the primary insurer has a loss threshold that is lower than aliability the primary insurer would be allocated for the claim based onthe first claim evaluation and the quota share assigned to the primaryinsurer for the insurance policy related to the first claim; anddetermining by the processor allocation data for allocating portions ofthe claim liability for the first claim among the at least two primaryinsurers based in part on the independent claim evaluation.
 24. Thecomputerized method of claim 22, wherein the evaluation of the claimassociated with at least one of the primary insurance policies is basedon information related to at least one of the magnitude of the claim andthe veracity of the claim.
 25. The computerized method of claim 22,further comprising outputting a fund transfer amount based on theallocation of the received premium payments.
 26. The computerized methodof claim 25, further comprising initiating a deposit into an accountassociated with one of the at least two primary insurers based on thefund transfer amount.
 27. The computerized method of claim 22, furthercomprising outputting a fund transfer amount based on the allocation ofthe claim liability.
 28. The computerized method of claim 27, furthercomprising initiating a payment from an account associated with one ofthe at least two primary insurers to a claimant based on the fundtransfer amount.
 29. The computerized method of claim 22, furthercomprising generating a report to at least one of the primary insurersincluding a total of claim liabilities allocated to the primary insureraccording to the stored quota shares.